Multiple major US company CEOs have recently issued warnings that consumer spending, long a pillar of economic resilience, may be nearing a breaking point due to persistent inflation, rising borrowing costs, and escalating living expenses. The strain is evident across various sectors, from food to household appliances.
Kraft Heinz Co (KHC.US) CEO Steve Cahillane provided a stark assessment of the financial pressure on low-income households. In a May interview, he stated bluntly, "They are really running out of money at the end of the month. We see that low-income consumers have negative cash flow. They are dipping into savings to cover everyday expenses." The company, owner of brands like Heinz, Kraft, and Philadelphia, has begun reducing prices on some overpriced products, increasing promotions, and introducing smaller, lower-priced packages to cater to budget-conscious shoppers. Cahillane noted the industry has faced "volume declines" for years as consumers absorbed "too much pricing." He warned that further price increases would squeeze already strained household budgets, potentially leading to more pronounced inflation.
McDonald's Corp (MCD.US) CEO Chris Kempczinski also highlighted consumer pressure, pointing to "heightened anxiety." CFO Ian Borden added that rising gasoline prices particularly impact low-income families, who have significantly cut spending, while higher-income customers show more resilience. Whirlpool Corp (WHR.US) CEO Marc Bitzer described a sharp decline in demand for major appliances, with North America President Juan Carlos Puente calling it a "recession-level industry contraction" and noting a 15% drop in discretionary spending.
Where to start
Beyond corporate earnings, macroeconomic data confirms growing household financial stress. As of the first quarter of 2026, US credit card debt reached $1.25 trillion, and auto loan balances rose to $1.69 trillion. The personal savings rate fell to just 2.7% in June. The Federal Reserve's latest report on household economic well-being showed that 16% of adult respondents could not pay all their bills in full the previous month, with 42% of those unable to pay falling behind at least once. While not all Americans are financially depleted, those with the thinnest buffers are increasingly struggling to cope with rising costs, relying on credit or savings to cover daily expenses.
Although overall inflation has moderated from pandemic highs, the cost-of-living crisis continues to impact consumers. Since early 2020, food prices have risen over 33%, housing costs about 33%, and energy prices more than 42%. Even if inflation slows, the accumulated price increases do not reverse, establishing a higher baseline for household budgets. This reduces the ability to handle unexpected expenses or build savings. According to the Minneapolis Fed inflation calculator, $100 today has the purchasing power of just $11.74 in 1970, further eroding the ability of struggling families to build emergency reserves, repay debt, or invest long-term.
Hedging against inflation
Historically, investors have found effective ways to hedge against inflation. Two asset classes proven over market cycles are gold and US real estate. Gold is a time-tested store of value and inflation hedge, as it cannot be arbitrarily issued by central banks. It is considered a safe-haven asset, with investors flocking to it during economic turmoil or geopolitical uncertainty, driving prices higher. Ray Dalio, founder of the world's largest hedge fund, Bridgewater Associates, has repeatedly emphasized gold's defensive role in portfolios, stating, "People typically don't hold enough gold in their portfolios. It's a very effective diversifier when markets face headwinds." Despite recent price corrections, gold has risen over 30% in the past 12 months.
US real estate is also a powerful inflation hedge. Rising costs for materials, labor, and land often push property values higher, while rental income typically adjusts with inflation, providing a cash flow linked to prices. Over the past decade, the S&P CoreLogic Case-Shiller National Home Price Index has risen 88%, reflecting strong demand and limited supply. As the US consumer engine shows signs of fatigue and the financial cushion for lower-income households thins, inflation is a persistent structural challenge. Allocating to assets like gold and real estate may offer investors a path to preserve purchasing power and achieve returns in this macro environment.
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